Big Government and Big Money are both Ayn Rand’s Children

Though she never would have admitted it, Big Government is her bastard child, along with her favored son:

A heroic being, with his own happiness as the moral purpose of his life, with productive achievement as his noblest activity, and reason as his only absolute.

— Ayn Rand, Atlas Shrugged

It’s time that both Ayn’s children left home (Earth). Maybe Elon could offer them a ride on his rocket to Mars.

This is not to deny the need for government or money, nor the value of the free market in allocating resources among those who have money… and equal knowledge and power, who understand the full consequences of their decisions… and act rationally!

There is little doubt that markets are the best we have for allocating resources among buyers and sellers. But they are not perfect… because people are not perfect. Nor do they work if you have no money.

Money is like a vote to signal what you want the market to produce. No money, no vote. No vote, nothing gets made to meet your needs.

She seems not to have understood a basic economic truth: that the total value of every good and service produced is equal to the total income of all participants in the process. Participants take their income shares as wages, interest, fees, royalties, rent and profit.

In the absence of sharing, they are able to consume all that they produce — as they spend their incomes.

But what about the people who cannot participate in the process: the young and old and incapacitated and those without the skills required by the market… and their unpaid carers (over 50% of the population)?

The only way they can share in the bounty is for those who participate in the production process to share some of their income. In part, this is done through family (but with family breakdown, less so nowadays) and part through charity. The rest is through taxes… and crime (a rational response to exclusion).

From a naively selfish perspective, I should share nothing.

And yet, even rationally, we should pay taxes to help the poor as it is now well established that poor people suffer much worse health and are afflicted by more crime… both these drain social resources and diminish productivity and safety for everyone in the community.

Unfortunately, Rand saw taxation as theft. A view happily endorsed by those who see their own self-interest in the accumulation of money.

These are bad ideas. They result from a failure to understand the nature of money, seeing it as a ‘good’ to be accumulated, rather than the ‘means of exchange’ that must circulate.

As tax is spent, it goes straight back into the hands of the people who paid the tax; those who work in and own the businesses that provide the goods and services the money buys. The more money going round, the higher the turnover, the more wages and profit earned, the greater the wealth that is generated.

There are also goods we may agree to produce collectively, such as roads and other infrastructure, as well as services, such as the administration of justice and policing, etc. that involve natural monopolies or common interests. Tax is how we pay for these.

Strike one for Rand’s world view.

Rand also abhorred the use of force by the State. Except to prosecute criminals and enforce property rights in the pursuit of “full, pure, uncontrolled, unregulated laissez-faire capitalism”.

Yet, all rights come with restrictions and responsibilities.

My right to make noise is balanced by your right to peace and quiet. Your right imposes on me both a restriction (to make noise only up to a certain volume and only between certain times in certain places) and a responsibility (to not make noise outside those restrictions).

My right to make whatever concoction I choose (and claim whatever properties I like for it) is balanced by your right not to be poisoned or deceived. Again restricting what I can make and sell and what I can claim. Also imposing a responsibility to not make and sell products that are harmful, and to not make false claims.

My right to dig up whatever I like, wherever I like, and emit whatever foul chemicals and waste I like in the process of making stuff, is balanced by your right to live in peace with clean air, water and food, restricting what I can and cannot do; placing on me a responsibility to abide by the restrictions.

We all have restrictions and responsibilities as well as rights. However, none of these are absolute.

Traditionally, it is social norms that circumscribe our rights and responsibilities, and define and restrict ‘anti-social’ behaviour.

But what of large cities, with shifting and increasingly multi-cultural populations? Universally, human beings in these situations have found it necessary to establish the limits to behaviour via regulation, enforced by the State.

The alternative is lawlessness.

The problem is not that the State enacts laws and enforces them. The problem is the extent to which the law imposes restrictions that are ‘unfair’, ‘over-bearing’ or ‘add no value’.

It is not as simple as saying ‘get rid of government’, as the anarchists would have us do, or just ‘make it smaller’, as the libertarians prefer.

We don’t need more laws to fix market failures and anti-social behaviour… nor less laws to restrict big government.

The behaviours we are trying to influence have not changed for generations.

Instead of more or fewer laws, we need simpler laws that people understand, which are fairly enforced.

Getting there requires a process of continuous improvement. An active review of all laws on a rolling basis to understand their purpose, and to check that they actually elicit the behaviours intended. In fact, the more laws there are, the more of our administrative and legal resources should be devoted to revisiting, revising and simplifying them, as opposed to writing new ones.

All our competing Rights, Responsibilities and Restrictions flow through to the ‘market’.

As such, it is impossible to have a ‘free market’, unencumbered by government ‘interference’. This is especially so where the market is no longer mainly composed of many small producers, but is dominated by a few large conglomerates.

‘Free’ simply means free to compete on the same terms. It does not mean ‘free to do what I like’.

The purpose of regulatory intervention in the market ought to be to protect the rights of the general population — by imposing restrictions and responsibilities on participants to prevent them running roughshod over our individual rights in pursuit of their own ‘happiness’ (profit).

It would be better if we did not need laws, if we educated our children to adhere to cultural norms… but this is an ideal that must be tempered by reality.

People by and large are not rational creatures and are often led to act against their own self-interests. A cigarette anyone? Or how about this sugar hit?

Over our lives, we all gather innumerable biases and beliefs and react emotionally to such an extent that it is irrational to believe in the idea of a ‘rational human’!

Psychologists have shown how ‘post the decision’ we can ‘rationalise’ it (ie find reasons after the fact as to why it was the ‘right’ decision). This is a very different process to ‘making rational decisions’. Very few people go through such a process… even in business.

Most business decisions I have seen are made on the basis of ‘gut feel’, or at best ‘comparative data’.

A decision can only be truly rational if we first make explicit the decision criteria to be used in judging between alternatives, and the weight to be given to each. With all alternatives identified and assessed against all the criteria. Who does that?

Look at ‘climate change’. Is it rational to heat up the only planet we have? Is it even rational to deny the possibility, when there is no other place to go and the consequences are potentially dire for us and all future generations?

If government is to protect the rights of its citizens, as Rand would have it, don’t the countless billions of ‘yet-to-be-born’ citizens have the same rights as you and I?

Perhaps Rand would say: too bad for future generations, I’m pursuing my own happiness!

Rand’s focus on individual rights and one’s own happiness may seem logical (which is how Rand fancied a mind ought to work). But such fancy flies in the face of the facts… which is the definition of irrationality.

Making Rand’s appeal to ‘follow reason’ an empty exhortation.

Strike two.

Rand also advocates:

• Work hard to achieve a life of purpose and productiveness.
• Earn genuine self-esteem.
• Prosper by treating others as individuals, trading value for value.

At face value, these are not bad injunctions, compromised by her last imperative:

• Pursue your own happiness as your highest moral aim.

This is based on the assumption that ‘the pursuit of happiness’, as an end in itself, leads to enduring happiness (as the US Constitution also implies). Who has not seen or experienced the exact opposite?

Who are happiest: those who pursue the objects of their desire (their ‘happiness’) at all costs, or (as her other precepts reference) those who live for what they can create and what they can provide to others?

As well, reason operates within the strictures of our social and economic systems. If the system encourages me to act in my own selfish interests to the detriment of others, reason must defer to it.

In banking, the system ensures ‘moral hazard’ by rewarding bankers with big bonuses and commissions on dodgy loans and securities, but shields them from the downside risk through government guarantees. It is therefore quite rational for any single banker to pursue dodgy deals, despite the social cost that we all bear (except for the bankers who keep their money when the deals go bad).

Is it rational for us to accept this situation? In our own interests, we should change the way the system works to eliminate this behaviour. Yet this can only be done by infringing or curtailing the rights of individuals to make money however they see fit under the current regime.

It means recognising rights which we all share in common. Not just individual rights.

Rand treats each individual as their own centre. Yet, as the old aphorism goes: we are no islands. I can only achieve what I achieve because we collaborate together to achieve it.

In writing and posting this article, I rely on the knowledge generated by untold numbers of people: those who design computers, write software, design and build machines of every sort, and extract the minerals and grow and process and deliver my food… and in a million other ways.

Rand seems to place importance on competition above all… relying on Adam Smith’s ‘Invisible Hand’ to deliver the best outcome for us all.

Yet, competition is only part of the story.

All animals compete. Humanity is so successful not because we compete, but because we collaborate in ways no other creatures come close.

How many people does it take to design and make a modern car in a modern factory… not just in space, but over time.

It is the sum total of all accumulated knowledge and skills that allows a car to be designed and built. All people must be educated from prep and trained to work in all the different factories to design and make the parts to make the machines that make the parts that make the machines that go into the machines that make the cars, as well as all parts for the cars themselves. Not to mention the people that build and maintain the cities that house and feed and educate everyone; and the companies that make the drugs and the doctors that keep us healthy… on and on.

Competition takes place only at the point of decision making.

Essentially, competition exists only between ideas: between ‘this’ and ‘that’. It occupies only a tiny portion of human activity. Once the decision is made, most activity is collaborative. It extends along the whole supply chain to the point of delivery of the manifested good and/or service.

By all means, let’s be rational: understand that we are irrational beings utterly dependent upon each other.

We are each a tiny cog in this great wheel of collaborative endeavour that we call life.

We are not only dependent on other humans (past and present), we are utterly dependent upon the eco-system services that bring us air, food and water, as well as medicine… even ‘spiritual’ peace found among the wilds of nature.

Rand sees none of this.

Strike three.

The reference in the heading to ‘Big Government’ and ‘Big Money’ is not about the size of either Government or the Money Supply. It is pointing instead to the financialization of the economy and the concentration of power (on both sides of politics) in the hands of those with money who have taken Rand to heart — to pursue their own self-interests.

On the one hand removing legislation that placed fetters on them, or making it so complicated that enforcement becomes almost impossible. While on the other, imposing regulations ‘in support of their industry’, which are really only barriers to entry for new players, or allocations or even more money from the public purse. How ironic for Rand.

This is not an attack on the accumulation of wealth, but a caution that lobbying in our own interests ought to be an individual affair, and not the province of Big Money. Our rights, responsibilities and restrictions should be ‘self-determined’ by everyone equally.

The inter-dependence between people, and between people and other creatures and our eco-systems, indicates that ‘self’ is a much broader concept than the mere ‘human body’ a person may possess.

On this wider view, perhaps Rand is right after all…

But then, she would have to sacrifice the rights of individual ‘me’ for the rights of the ‘greater me’… if it was in the best interests of the whole do so. And she would have none it.

The evidence is against her.

Our success as a species is testimony to the worth of collaboration and sharing within a robust market for ideas, where money is simply a vote for what we each want produced… within a framework of rights, restrictions and responsibilities that ensure civil society, governed by the people, for all the people (including those who cannot participate in the production process… ever more as automation takes hold).

We have succeeded, not because we are individuals, but because we are a community of individuals who strive together.

The problem is not that the rich have too much money. It is that the poor have too little, or none at all to give expression to their needs in the market.

All that’s missing is a way to ensure a minimum standard of living for everyone without encouraging sloth, and without the need for moral judgement about who should get how much.

This does not require us to take away wealth from anyone.

How we may address this problem is a topic for another day.